The Lawletter Vol 46 No 5
In a closely watched case, California v. Texas, 141 S. Ct. 2104 (2021), the Supreme Court recently turned back a third challenge to the federal Patient Protection and Affordable Care Act ("ACA" or "Act")—the extensive health-care reform law enacted in 2010 that includes, among other things, a requirement for all individuals (known as the "individual mandate") to obtain a minimum level of health insurance coverage (known as "minimum essential coverage" or "MEC") or to pay a tax penalty to the Internal Revenue Service ("IRS"). In subsequent legislation, Congress reduced the penalty from $695 to $0. At that point, the State of Texas, joined by several other states and two individual plaintiffs, filed a challenge to the amended Act in a federal district court sitting in Texas. The court held that Congress's effective elimination of the tax penalty had rendered unconstitutional the individual mandate to obtain MEC, as it could no longer be justified as a tax. Further, because the unconstitutional provision could not be severed from the rest of the ACA, the entire Act was invalid. In its June 2021 decision, the Supreme Court did not reach these substantive issues, instead ruling 7-2 that neither the states nor the individual plaintiffs had Article III standing to bring the suit, as none had shown a past or future injury "fairly traceable" to the officials' conduct.
In an opinion by Justice Breyer, the Court first noted the individual plaintiffs' claim that they had suffered a particularized harm in the form of past and future monetary payments made each month in order to carry the required MEC. Assuming without deciding that this "pocketbook injury" satisfied the injury-in-fact element of Article III standing, the Court determined that the plaintiffs nevertheless failed to satisfy the "traceability" element. Their problem lay in the fact that the statutory provision, while it required them to obtain MEC, had no means of enforcement. With the penalty "zeroed out," the IRS could not extract a penalty from those individuals who failed to comply. Thus, there was no possible government action that could be causally connected to the plaintiffs' alleged injury. To put the matter conversely, the injury was not "fairly traceable" to any "allegedly unlawful conduct" of which the plaintiffs complained.
The Court then considered the individual plaintiffs' claim from the viewpoint of another standing requirement—the redressability of the injury. To determine whether an injury is redressable, a court considers the relationship between the judicial relief requested and the injury suffered. In this case, the plaintiffs sought injunctive relief and a declaratory judgment. The injunctive relief, however, concerned the ACA's other provisions that the plaintiffs argued were inseverable from the MEC requirement. The only relief they sought concerning the MEC provision was a declaration of its unconstitutionality. But the Declaratory Judgment Act alone does not provide a court with jurisdiction. The underlying dispute itself must meet the standing requirements, and the Court had just determined that in this case it did not. To find standing to attack an unenforceable statutory provision for an alleged injury that was not redressable, as in this case, would allow a federal court to issue an advisory opinion without the possibility of any judicial relief—something a federal court simply cannot do.
Concerning the state plaintiffs, the Court noted that the plaintiffs claimed they had sustained two kinds of pocketbook injuries. First, they alleged an indirect injury in the form of the increased use of, and therefore cost to, state-operated medical insurance programs. Second, they claimed a direct injury resulting from a variety of increased administrative and related expenses required by the MEC provision, along with other provisions of the Act that they believed were inextricably interwoven with it. Specifically, the state plaintiffs claimed that the MEC provision caused state residents who were subject to it to enroll in state-operated or state-sponsored insurance programs such as Medicaid, the Children's Health Insurance Program, and health insurance programs for state employees, thereby increasing the states' costs. The Court held, however, that, like the individual plaintiffs, the states failed to show how their injuries were fairly traceable to any actual or possible unlawful government conduct in enforcing the MEC provision. That failure alone was enough to defeat the states' claim to Article III standing.
Aside from that pure issue of law, the Court identified another fatal weakness on the part of the state plaintiffs: They failed to show that the challenged MEC provision, without any prospect of penalty, would harm them by leading more individuals to enroll in the state-related programs. Noting that these programs offer their recipients many benefits that have nothing to do with the MEC provision, the Court cited statutes providing for no-cost Medicaid services furnished to children and pregnant women, prohibiting Medicaid premiums for certain individuals with family income below 150% of the poverty line, and providing premium tax credits to make health insurance plans, including employer-sponsored plans, more affordable. Given these benefits, neither logic nor intuition suggested that the existence of the MEC requirement would lead an individual to enroll in one of the programs that the provision's nonexistence would cause them to ignore.
For these and other reasons, the Court concluded that none of the plaintiffs had shown a concrete, particularized injury fairly traceable to the federal officials' conduct in enforcing the specific statutory provision they attacked as unconstitutional. Thus, the plaintiffs failed to show that they had Article III standing to challenge the Act's MEC provision. The Court reversed and vacated the Fifth Circuit's judgment to the contrary and remanded the case with instructions to dismiss.
Justice Alito, joined by Justice Gorsuch, dissented, declaring that the states had standing for reasons that were "straightforward and meritorious." Regarding the "fairly traceable" requirement, the dissenters believed that the states sufficiently claimed that the individual mandate was unconstitutional and that without it they would not have had to pay the expenses flowing from provisions of the ACA that were inseverable from the mandate.
This decision is obviously of great consequence to all the stakeholders in the matter of health-care insurance coverage—including employers. The ACA remains intact. Nothing needs to be changed. If the Court had ruled that even one of the plaintiffs had standing, it would have proceeded to the merits of the claim, raising the possibility of the entire Act being struck down. To say that such a result would have required change by all stakeholders is perhaps the understatement of the year.